TriOptima announced today that it has completed the first portfolio compression cycle following a restructuring event under the newly-implemented ISDA 'Small Bang Protocol'.
With 28 dealers participating, 6850 Thomson single name trades with a notional value of $16 billion USD were eliminated on a net basis.
Once a restructuring credit event had been determined by the ISDA EMEA Credit Derivatives Determinations Committee, TriOptima offered its triReduce portfolio compression service as the first step in reducing the number of outstanding Thomson trades prior to an auction settlement.
""There were a significant number of European iTraxx index contracts affected by Thomson's restructuring, which resulted in increased operational risk due to the volume of new single name contracts created. We worked in close consultation with the industry to ensure the maximum reduction in both ticket count and gross notional in advance of the auction settlement process to reduce this risk," said Ulf Andersson, Global Business Manager for triReduce. "We are pleased that we are able to support the industry in its important efforts to achieve transparency, liquidity and operational efficiency."
In anticipation of the Thomson restructuring credit event, TriOptima had completed a portfolio compression cycle on August 14 in European index tranches including the Thomson name, eliminating 2515 tranche trades with a notional value of $113 Billion USD. "Eliminating tranche trades prior to the auction settlement also achieves significant risk reduction," said Henrik Nilson, Head of Business Development, TriOptima. "The industry is pursuing all opportunities to ensure the smooth operation of the new settlement process."
ISDA's 'Small Bang Protocol' was developed following the publishing of the 'Big Bang Protocol' in March 2009. The 'Small Bang Protocol' includes a series of amendments suggested by market participants and allows for the incorporation of auction settlement terms following a Restructuring Credit Event into standard CDS documentation.